Financial Leverage Exposes Shareholders to Financial Risk Because

question 15

Multiple Choice

Financial leverage exposes shareholders to financial risk because:

• A)competition forces companies to adopt an optimal capital structure.
• B)a company uses debt to increase the expected rate of return to shareholders.
• C)interest on debt needs to be paid even when operating performance declines.
• D)none of the given options.

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Definitions:

Starter Coil

An electromagnetic coil used in starting systems of engines or motors to provide the initial torque or to engage the starting mechanism.

Pressure Switch

An apparatus that engages or disengages an electric circuit in response to reaching a specified fluid pressure at its input.

Ladder Logic

A graphical programming language used in programmable logic controllers (PLCs) that represents electrical control circuits with symbols resembling a ladder.

Functional Block Diagram

A graphical representation of a system’s functional relationships, showing blocks (functions) interlinked by lines which represent the system’s flow of data.